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The 1980s: ‘When things actually happened’


Creative destruction

Indeed, the ’80s seemed at times like a case study in Austrian economist Joseph Schumpeter’s “creative destruction”.

But it wasn’t all corporate thrills and spills. Growing confidence in what it means to be Australian was captured in a remarkable decade of film, television, theatre, music and literature. Crocodile Dundee, starring Paul Hogan, was a global hit. Baz Luhrmann’s play, Strictly Ballroom, was a big ’80s stage success before becoming a ’90s celluloid smash.

Neighbours, Home and Away and Prisoner were popular TV programs abroad, while INXS, Men at Work, the Divinyls, Cold Chisel, Australian Crawl, Midnight Oil, Hunters and Collectors, Kylie Minogue and Nick Cave exploded onto the world music scene. There was even an ’80s band called Bottom of the Harbour.

The film “Crocodile Dundee”, starring Paul Hogan, was a global hit in 1986. Paramount

Australian authors Thomas Keneally (Schindler’s List) and Peter Carey (Oscar and Lucinda) won Booker Prizes during the decade, which ended with the death of Australia’s great Nobel prize-winning novelist, Patrick White.

Australian business may not have been a novel, but it followed a compelling ’80s narrative. Some companies crashed, but others in mining and smelting (BHP, CRA-Rio Tinto, Western Mining-Alcoa) expanded, while there was significant overseas expansion in corporate medicine (Nucleus, Cochlear and Resmed), banking (Macquarie), retail (Westfield) and media (News Ltd), which changed its corporate domicile from Australia to the US.

The Financial Review covers the 1987 sharemarket crash.  

Asset prices took off, but were briefly pole-axed by the global sharemarket crash in October 1987.

More broadly, it was a time of big tectonic shifts. About 1.7 billion people in Eurasia, or nearly one-third of the world’s then population of 5.3 billion, shed collectivism. Eastern Europe embraced the market economy, crony authoritarianism developed in Russia, and state capitalism emerged in a China remaining under the iron grip of the Chinese Communist Party.

Boom-bust cycles

Back in Australia, there were similar patterns to previous decades, with boom-bust cycles bookending the ’80s. In between, a concatenation of political, technological, economic, cultural and demographic factors wrought significant change. Regarding demography alone, the biggest names in business during the decade were dominated by migrants – people like John Spalvins, Arvi Parbo, Frank Lowy, Peter Abeles, Robert Holmes a Court and Alan Bond.

At the beginning of the 80s, a mining investment boom was in full swing. OPEC’s tripling of oil prices in 1973, and their doubling again in 1979, generated soaring demand for thermal coal. Coal, now tarred as a carbon polluter amid the climate change crisis, back then was referred to as “the new black gold”.

Another oil price rise spin-off was a boom in aluminium smelting, which due to its high energy usage resulted in the metal being referred to as “congealed electricity”. Once again, growth was powered by using coal to generate electric power at comparatively cheap prices.

Liberal prime minister Malcolm Fraser became a new mining projects champion. Fraser had been in office more than five years, and secured his third election victory in 1980, but with a reduced majority.

But the mining fizzled out and the economy was ailing. Tax exploded as an issue in The Australian Financial Review and then took off in the royal commission, headed by Melbourne barrister Frank Costigan, into the Ship Painters and Dockers Union. As historian Frank Bongiorno writes in The Eighties: The Decade That Transformed Australia, the Dockers Union was distinctive “in the role that murder played in its internal affairs”.

Former AFR editor Colleen Ryan broke the story of the ‘Bottom of the Harbour’ tax scheme in 1980.  

‘Raking it in’

During its inquiries, the Costigan inquiry chanced upon the significant role the union played as host to so-called “bottom of the harbour” tax schemes.

First revealed by Colleen Ryan in the Financial Review in 1980, these schemes involved a company with a significant tax liability being sold on to a tax promoter who would strip them of their cash and then proverbially send it to the ‘bottom of the harbour,’ often via the murky precincts of the Dockers union.

By taking advantage of a tax law loophole, “bottom of the harbour” companies evaded paying tax.

Ryan, who studied economics and accountancy, and worked for Arthur Andersen before joining the Financial Review in the mid ’70s, noticed while at Andersens that one of her colleagues involved in establishing these tax schemes was driving a Rolls-Royce to work.

“They were raking it in [but] it was legal when they were doing it, and it was a huge business,” she says.

“Other people took advantage of the schemes.”

One was Peter Fox, a financier and “man about town” who, among other activities, raised money for films using the government’s 10BA scheme. Fox ran his affairs through a tangled corporate web that was called Adelaide Holdings. He also owned one of four handmade Ferrari 400s in Australia. It was ice-blue, with beige upholstery, and in the early ’80s retailed for $125,000.

In 1981, Fox bought Boomerang, the magnificent art deco harbourside mansion in Sydney’s Elizabeth Bay, for the then dizzy sum of $2.5 million. Boomerang, with its beautiful gardens and airy rooms, was originally built for the sheet music business-owning Albert family in the 1920s. Ted Albert, the family scion, was an early backer of Luhrmann’s Strictly Ballroom.

After Liberal treasurer John Howard introduced retrospective legislation to outlaw “bottom of the harbour” schemes, the government launched numerous prosecutions. Looking back, Ryan says: “I am not sure how many of them ended up in jail.”

In 1982, amid tax evasion revelations, Fox ran his Ferrari 400 into a tree near Kempsey on the NSW North Coast and was killed.

Big projects

There were other then-and-now similarities. As Japan and Australia signed a new defence agreement at the start of 2022, it’s interesting that back in February 1980, the Financial Review editorialised: “A most important result of the present wave of international turmoil is that for the first time in 30 years, Japan is showing itself prepared to take strong stands on major world issues. ”

The paper cited Japanese insistence on going ahead with the construction of a $3 billion petrochemical complex in Iran, against virulent US objections.

Work progresses on the North West Shelf project in 1981. 

Indeed, it was a time for big projects. Fraser boasted during the 1980 election campaign that almost $30 billion was earmarked for local resource developments, including the giant North West Shelf natural gas project. As historian David Lee points out in his book, The Second Rush, this was six times the amount Labor’s then minerals and energy minister, Rex Connor, earmarked for investment during the first OPEC crisis in 1973.

Many on Fraser’s projects list were later abandoned, as growth-sapping stagflation undermined demand. Local inflation was above 11 per cent in 1982 and unemployment rose sharply to 10 per cent the following year – the worst figure since the Great Depression. But average wages increased by 13 per cent a year for three years, starting in 1981-82.

According to a Treasury document, wage claims were “formulated in anticipation of benefits which had not, in fact, yet begun to flow”. Meanwhile, for the first time in Australia’s history, the federal government paid more than 20 per cent for its short-term funds. The average yield in the weekly note tender in early April 1982 came in at 20.057 per cent.

At the same time, Alcan, the Canadian aluminium producer, deferred commissioning its third potline at its Kurri Kurri aluminium smelter in NSW’s Hunter Valley. Work was also delayed on BHP’s planned aluminium smelter at Lochinvar in the Hunter Valley.

AFR Editor P.P. McGuinness predicts the recession in 1982. 

In a May 1982 story headlined WA’s Cargo Cult Goes Sour, John McIlwraith, the paper’s Perth correspondent, said deferment of phases of the North West Shelf project, uncertainty about other projects, a decline in exploration and lower gold prices, contributed to “an atmosphere of wariness about the outlook for the next 12 months”.

“Serious miscalculation” was “at least partly the fault of politicians. For years the ‘cargo cult’ of the North West Shelf was held out as the great hope of the state,” McIlwraith wrote.

Meanwhile, “the much-discussed coal boom was finally buried at the third Australian coal conference”, with the mood swinging “from euphoria to almost unmitigated gloom,” the Financial Review reported.

‘Plunging into recession’

Amid the gloom, former foreign minister Andrew Peacock was mounting a leadership challenge against Fraser. “We just can’t succeed under the present leadership,” he said. Peacock had “received a useful fillip” in the form of the Fraser government’s lowest poll ratings, but his bid was “apparently futile”, said Anne Summers, the Financial Review political correspondent.

“Whatever Mr Fraser’s faults and mistakes, he is a proven leader of strength and great competence,” an accompanying editorial opined, although he was “weak and wrong-headed” regarding protection.

As per Summers’ forecast, Fraser easily won the leadership ballot, but worse was to come on the economic front. On April 14, 1982, Financial Review editor P.P. McGuinness warned: “The Australian economy is plunging into recession. And between them, the Federal Government and the Arbitration Commission are likely to ensure the recession deepens into a genuine depression.”

The international climate had taken a dramatic turn for the worse, as the US recession deepened. Japan was not “expected to grow at the rate necessary to sustain demand for Australian coal and iron ore, and Japan-dependent energy projects were “adversely affected” by the oil price fall and the possible collapse of OPEC.

“World commodity prices have also weakened, so that the ‘resources boom’ no longer seems to be the imminent bonanza it seemed a year ago.”

Reinforcing the darkening mood, Glenda Korporaal reported from New York the US economy shrank 4 per cent in 1982’s first quarter. Injecting a local angle into the Big Apple, Chanticleer (aka Alan Kohler) observed: “They are not exactly on the street asking ‘Buddy, can you spare a dime?’ in an Australian accent, but the Australian brokers which have put out shingles in New York (including J.B. Were, A.C. Goode, Ord Minnett and Potter Partners) could have had better timing.”

The Campbell report

On a more bullish note, Chanticleer reported expatriate, New York-based investment banker James Wolfensohn, had branched out on his own after working for Salomon Brothers on the late ’70s bail-out of stricken US carmaker Chrysler. He had garnered 10 clients, including the Bank of NSW (now Westpac), CRA (now part of Rio Tinto), Lend Lease, Kerry Packer’s Consolidated Press Holdings, Continental Grain, Overseas Shipowners, Aetna Life, and the German Metallgesellschaft group.

Back home, Australian politics was in stasis. Fraser’s government was like a rabbit caught in recession headlights. It was loath to open up the economy, despite the urging of the Financial Review, some academics and outside business advisers such as Sir Keith Campbell.

Meticulous, driven but fair and courteous, Campbell was a 15-year veteran as a director, chief executive and chairman at property group Hooker and credited with saving the company from collapse in the ’60s. “A tall, spare man with sandy (later greying) hair, Campbell commanded widespread respect,” the Australian Dictionary of Biography noted.

AFR editor Paddy McGuinness (left) with Fred Brenchley and Keith Campbell in 1981. Paul Matthews

In 1979, he was appointed chairman of a committee of inquiry into the Australian financial system. “What the media termed ‘the Campbell Inquiry’ soon became a catch-phrase for economic reform,” the ADB observed. His 838-page report, completed in 1981, recommended moving to a market-based exchange rate system, permitting the entry of foreign banks and largely deregulating banking.

Responding, the Bill Hayden-led Labor Opposition was scathing. Interest deregulation would add another 2 per cent to home mortgage loans rates, it claimed, and the Campbell report was “an expression of the Fraser Government’s ideology,” with “a sophisticated, self-interested set of proposals on behalf of already powerful financial institutions”.

It didn’t turn out that way – not for the Coalition, and not for Labor. Following publication of the Campbell report, treasurer Howard told the Merchant Bankers Association the government would not have established the inquiry if it did not intend to deregulate the financial system. After Fraser effectively nixed its recommendations, Howard changed his tune, with vague references to “social and political sensitivities”.

Houdini Hawke

Fraser was unpopular, but Hayden was distracted by the leadership onslaught of Bob Hawke, a former ACTU president and Labor MP for the Victorian seat of Wills since 1980. Just as Fraser was set on exploiting Hayden’s lack of popular support by calling an early election, prominent ALP figures like Victorian frontbencher John Button persuaded Hayden to step down in early February 1983.

The new Labor leader, was, to use a common journalist’s refrain,“good copy”. “Houdini Hawke” – a reference to his capacity to successfully mediate in bitter industrial disputes – was charismatic. Two sentiments – treat people fairly, and make a “quid” on the way – were writ large in Hawke’s persona and resonated with the public. Voters felt close to him, reflected in his record 75 per cent popularity rating in the AC Nielsen poll in 1984.

Bob Hawke and Paul Keating at a press conference in February 1983. Antonin Cermak

Up close, Hawke could be moody. He was a heavy drinker (although officially ‘on the wagon’ since becoming an MP), with a nasty temper and philandering ways.

Promising to “bring Australia together,” the inclusive Hawke secured a 24-seat swing in the March 1983 election and decisively defeated Fraser. The patrician Western District grazier abruptly departed the parliamentary scene. “Fade in, fade out”, as Lily Tomlin, the American actor, once put it.

Prime minister Hawke set about securing economic reform. The key events took place 30 to 40 years ago and their significance is muddied by conflicting accounts exacerbated by a spectacular public falling out between Hawke and his treasurer, Paul Keating, who replaced him as Labor PM in 1991.

What is undeniable is that Hawke’s popularity, capacity to secure concessions from business and unions, understanding of what sort of reform was required, support of cabinet ministers such as John Dawkins and Peter Walsh, the Financial Review’s long-standing “let’s open up” advocacy, plus the backing of Treasury officials such as Ted Evans and David Morgan, broke the reform logjam.

Later, Keating became the main economic reform driver.

“The Change” began with the December 1983 float of the Australian dollar, followed by implementation of key Campbell recommendations like deregulating banks and allowing in foreign banks. Tax reform followed, with reduction in the top income tax rate, dividend imputation, the capital gains tax and fringe benefits tax. Then the reform caravan moved on to big tariff cuts, followed by enterprise bargaining, microeconomic reform and compulsory superannuation.

Australian confidence

In his book The Second Rush, historian David Lee argues the reforms were “not due to a sudden realisation that Australia had taken a wrong turn” by pursuing highly protectionist policies. “Rather, the rise of Japanese demand for Australia’s resources in the 1960s and 1970s presented Australia with new options that it did not [previously] have.”

In a similar vein, the Cambridge Economic History of Australia says the confidence that made economic reform possible was the complementarity of Australia’s growing Asian engagement, one where Australia exported iron ore, coal, wool, and meat, and imported manufactured products.

“Australia benefited from the fast-growing Japanese market and had a positive bilateral trade balance with that country.”

However, the US, Canada and Europe “worried about competition from Japan during the 1970s and 1980s”.

This growing Australian confidence was reflected in the scaling back of protection. By the early 90s, the average rate of protection was just one third of the figure of a few years before. Trade costs measured as a percentage of the value of imports fell dramatically, halving over a 20–year period up to 2008.

At the same time, the role of foreign investment increased. This was partly due to the rise in the number of major resource projects, but also to increasing globalisation. Another factor was more Australian investment abroad, although some corporates, like the established big four Australian banks – the Commonwealth Bank, Westpac, National Australia Bank and ANZ – ventured forth and retreated.

Both Lee’s book and the Cambridge tome raise important points. But the question of why the Hawke-Keating governments secured the reforms, but those preceding did not, while already enjoying the wealth generated by the Pilbara and coal mine expansion, were not fully addressed.

A further factor complicating their thesis is that mining experienced a downturn in the 80s. Lee points out that from 1983 to 2000, worldwide production of resources “exceeded demand,” minerals earned lower prices, “and mining companies often recorded poor results”.

But this did not darken the post-1983 election mood. Hawke entered office as Australians were tired of a decade of thrashing about.

To deal with the challenge, Hawke and treasurer Keating adopted a hybrid model – one far removed from traditional, redistributive Labor dogma. It had one foot in the Reagan-Thatcher camp – tax cuts, reductions in government spending and privatisation – and another in ’70s social contract politics through the Prices and Incomes Accord.

The nub of the Accord was wage restraint in return for increases in the “social wage” such as tax cuts, introduction of Medicare, and compulsory superannuation. To incubate this new economic order, Hawke called a post-election summit of business, unions and government.

Hawke’s economic summit

Once again, luck played a hand. Days before the summit began, the heavens opened, pouring their liquid bounty on a parched land and the Financial Review hailed the end of “the worst drought in recorded history”.

P.P. McGuinness reported that “both the business community and the unions are looking forward to [the summit] in a virtually unprecedented mood of co-operation”. However, “there is no reason to expect the summit will produce any solutions to the problems of the Australian economy”.

“The basic facts are well known – unemployment of nearly 10 per cent, declining gross domestic product, an inflation rate considerably higher than most of our major trading partners, a rural sector prostrated by a prolonged drought, a mining sector suffering from declining markets in Japan and the rest of the world, and a manufacturing sector suffering from rising unemployment.”

According to the Financial Review’s Chanticleer column, “a wave of pessimism [had] swept the business world in the months leading up to the summit”, triggering “one of the worst epidemics of retrenchments since the Great Depression”.

In a prescient comment about Hawke’s lucky summit timing, however, Chanticleer reported pessimism “is now largely gone again, as many…



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